Accounting Standard
AASB 1048 June 2005
        Interpretation and Application of Standards    


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CONTENTS
Preface Comparison With International Pronouncements Accounting Standard AASB 1048 Interpretation and Application of Standards                                                                                                                Paragraphs Objective                                                                                                                 1 Application                                                                                                       2 – 7 Scope                                                                                                                 8 – 9 UIG Interpretations corresponding to IASB Interpretations                        10 Other UIG Interpretations                                                                                   11       Australian Accounting Standard AASB 1048 Interpretation and Application of Standards is set out in paragraphs 1 – 11.  All the paragraphs have equal authority.  In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.
   

Preface
Reasons for Issuing AASB 1048
The Australian Accounting Standards Board (AASB) is implementing the directive of the Financial Reporting Council (FRC) to adopt the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1 January 2005.  In considering the adoption of the Standards of the IASB, the AASB reached the conclusion that it was desirable to issue an Accounting Standard clarifying the status of the pronouncements of the Urgent Issues Group, the UIG Interpretations (previously known as UIG Abstracts), that are approved by the AASB. All UIG Interpretations have the same authoritative status and those that are equivalent to the IASB Interpretations must be applied to achieve compliance with the International Financial Reporting Standards (IFRSs) of the IASB. The IASB defines IFRSs as comprising: (a)       International Financial Reporting Standards; (b)      International Accounting Standards; and (c)       Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). The Australian equivalents to IFRSs are: (a)       Accounting Standards issued by the AASB that are equivalent to Standards issued by the IASB, being AASBs 1 – 99 corresponding to the IFRS series and AASBs 101 – 199 corresponding to the IAS series; and (b)      UIG Interpretations issued by the AASB corresponding to the Interpretations adopted by the IASB, as listed in AASB 1048 Interpretation and Application of Standards. Before identifying the main features of this Standard, the adoption of the IASB Standards is described and the need for a ‘service Standard’ like this is explained.
Adoption of IASB Standards
In implementing the FRC’s directive, the AASB is replacing relevant existing AASB Standards with Australian Standards equivalent to those of the IASB.  The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities.  Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment.  Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues. This Standard complements the set of Australian equivalents to each IASB Standard (IFRS and IAS) and Interpretation of the IASB.  This set includes UIG Interpretations that correspond to the IASB Interpretations originated by the IFRIC or the SIC.  When considering the most effective approach to implementing the FRC directive, the AASB decided that Australian-source documents were needed to provide equivalents to the IASB Interpretations, and that these should be UIG Interpretations.  Correlation between the UIG Interpretations and the IASB Interpretations is provided in Table 1 of this Standard.  This Standard will be re-issued when necessary to bring the correlation up to date.
Need for a Service Standard
In the Australian context, UIG Interpretations do not have the same legal status as Standards (delegated legislation) and are treated as ‘external documents’ by the Acts Interpretation Act 1901 (and also by the Legislative Instruments Act 2003).  Although references in one Standard to a second Standard are ambulatory (automatically moving forward to refer to the most recently-issued version of the second Standard), references in a Standard to external documents are stationary (being fixed in time to refer to the contents of the external document when the Standard was issued).  A reference to an UIG Interpretation in an AASB Standard issued earlier (for example, in July 2004) than the reporting date at the end of the first effective reporting period can only refer to the Interpretation that existed then (in July 2004).  It cannot refer to any revised version of the UIG Interpretation that may exist at the nominated reporting date (for example, 30 June 2006).  However, an AASB Standard can be issued in July 2004, referring to a second AASB Standard (existing in July 2004) and, when the first Standard is applied at 30 June 2006, the reference will be to the then-current version of the second Standard (even if it has been re-issued after July 2004).   After analysing the issues, the AASB decided the service Standard approach constitutes the most effective way to ensure that the compliance required in the Australian equivalent of IFRS 1, AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, has the same meaning as intended in IFRS 1.   The service Standard approach involves issuing an AASB Standard listing the UIG Interpretations corresponding to each IASB Interpretation, and referring to that Standard in every other AASB Standard where necessary to refer to an UIG Interpretation.  This enables references to UIG Interpretations in all other AASB Standards to be updated by re-issuing the service Standard.   This approach preserves the status of UIG Interpretations as ‘external documents’ referred to in a Standard, with the ‘contents’ fixed in time to that existing when the Standard takes effect.  It does not treat the UIG Interpretations as delegated legislation or confer ambulatory status on the reference.  In each AASB Standard where there is a need to refer to an Australian equivalent of an IASB Interpretation, the reference will be to this Standard, phrased as “UIG Interpretation (number) (title) identified in AASB 1048 as corresponding to IFRIC (or SIC) (number)”.  This reference, being to another AASB Standard, is ambulatory and will refer to the Standard, AASB 1048, that is in force from time to time.  AASB 1048 itself will contain the direct references to the external documents and it will be re-issued to keep all references to UIG Interpretations in the other Standards up to date.   Implementation of this approach to clarifying the status of UIG Interpretations ensures there is no difference between the status in the hierarchy accorded to Interpretations in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors compared to AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.   A further advantage of this approach, compared to alternative approaches, is that it is able to be combined with implementing the perceived need for an AASB Standard clarifying the status of all UIG Interpretations, irrespective of whether they correspond to an IASB Interpretation.  
Main Features of this Standard
This Standard (issued in June 2005) supersedes the previous version of AASB 1048, issued in March 2005.
Application Date
This Standard is applicable in general to annual reporting periods ending on or after 31 December 2005, with exceptions for particular Interpretations (see paragraph 3).  To be consistent with the position for AASB Standards equivalent to IFRSs, early adoption of this Standard is not permitted for annual reporting periods beginning before 1 January 2005.  However, early adoption is otherwise permitted as specified in paragraph 4.
First-time Application and Comparatives
When an entity first applies this Standard in the context of adopting all Australian equivalents to IFRSs, AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, the Australian equivalent of IFRS 1, generally requires prior period information, presented as comparative information, to be restated as if the requirements of the Australian equivalents to IFRSs (including those UIG Interpretations equivalent to the IASB Interpretations) had always applied.  This differs from the requirements in previous Australian Standards, where changes in accounting policies did not require the restatement of the income statement and balance sheet of the preceding period.
Main Requirements
This Standard identifies the UIG Interpretations and classifies them into two groups:  those that correspond to each IASB Interpretation and those that do not. In respect of the first group (Table 1), it is necessary for those UIG Interpretations, where relevant, to be applied in order for an entity to be able to make an explicit and unreserved statement of compliance with IFRSs.  The IASB defines IFRSs to include the IFRIC and SIC Interpretations. In the second group (Table 2), this Standard lists the other UIG Interpretations, that do not correspond to the IASB Interpretations, to assist financial report preparers and users to identify the other authoritative pronouncements necessary for compliance in the Australian context. The Standard will be re-issued when necessary to keep the Tables up to date.
Changes from AASB 1048 (March 2005)
The differences between AASB 1048 (issued in March 2005) and this version issued in June 2005 are the addition of two UIG Interpretations to Table 1 in paragraph 10 of the Standard and the addition of two UIG Interpretations to Table 2 in paragraph 11 of the Standard, as set out in the following tables.      

Table 1 – Additions
 
UIG Interpretation
Issue Date
 
Title
IFRIC or SIC
 
UIG Interpretation June 2005
4
Determining whether an Arrangement contains a Lease
IFRIC 4
 
UIG Interpretation June 2005
5
Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 5

 

Table 2 – Additions
 
UIG Interpretation Issue Date
 
Title
 
UIG Interpretation April 2005
1013
Consolidated Financial Reports in relation to
Pre-Date-of-Transition Stapling Arrangements
 
UIG Interpretation June 2005
1052
Tax Consolidation Accounting

   

Comparison with International Pronouncements
AASB 1048 and IASB Pronouncements
There is no IASB Standard equivalent to AASB 1048.  However, Table 1 in AASB 1048 (see paragraph 10) contains a list of UIG Interpretations identifying the corresponding IASB Interpretations.
Compliance with IFRSs
Entities that apply the UIG Interpretations designated in this Standard as corresponding to the IASB Interpretations will simultaneously be in compliance with the Interpretations referred to by the IASB in its definition of IFRSs.  Such compliance is one of the prerequisites that needs to be met before an entity can make an explicit and unreserved statement of compliance with IFRSs, as described in IFRS 1 (paragraph 3).
AASB 1048 and IPSASs
International Public Sector Accounting Standards (IPSASs) are issued by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants. There is no IPSAS equivalent to AASB 1048.  Further, there are no Interpretations issued or adopted by the IPSASB that are equivalent to the IASB Interpretations or the UIG Interpretations.    
     

ACCOUNTING STANDARD AASB 1048
The Australian Accounting Standards Board makes Accounting Standard AASB 1048 Interpretation and Application of Standards under section 334 of the Corporations Act 2001.
 
D.G. Boymal
Dated 9 June 2005
Chair – AASB
   
aCCOUNTING STANDARD AASB 1048
Interpretation and Application of Standards
Objective
1         The objective of this Standard is to provide an up-to-date listing of UIG Interpretations and to ensure the effectiveness of references in AASB Standards to UIG Interpretations.
Application
2         This Standard applies to: (a)       each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act; (b)       general purpose financial reports of each reporting entity; and (c)       financial reports that are, or are held out to be, general purpose financial reports. 3         This Standard applies to annual reporting periods ending on or after 31 December 2005, except as follows: (a)       in respect of UIG Interpretation 3, this Standard applies to annual reporting periods ending on or after 28 February 2006; and (b)       in respect of UIG Interpretations 4 and 5, this Standard applies to annual reporting periods beginning on or after 1 January 2006. 4         This Standard shall not be applied to annual reporting periods beginning before 1 January 2005.  Otherwise, this Standard may be applied in respect of individual UIG Interpretations to annual reporting periods prior to the relevant annual reporting periods specified in paragraph 3.  An entity required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act may apply this Standard to such an earlier annual reporting period when an election has been made in accordance with subsection 334(5) of the Corporations Act. 5         When applied or operative, this Standard supersedes AASB 1048 Interpretation and Application of Standards as issued in March 2005. 6         The requirements specified in this Standard apply to the financial report where information resulting from their application is material in accordance with AASB 1031 Materiality. 7         This Standard will be registered on the Federal Register of Legislative Instruments, together with its accompanying Explanatory Statement, in accordance with the Legislative Instruments Act 2003.
Scope
8         This Standard refers to all UIG Interpretations currently approved by the AASB, classified according to whether or not they correspond to Interpretations adopted by the International Accounting Standards Board (IASB). 9         For ease of presentation, the UIG Interpretations are set out in two separate tables:  in paragraph 10, Table 1 lists those corresponding to IASB Interpretations and, in paragraph 11, Table 2 lists the other UIG Interpretations.  Each reference to an UIG Interpretation in a row in each of the Tables 1 and 2 is to be treated as a separate provision of this Standard.
UIG Interpretations corresponding to IASB Interpretations
10       An entity shall apply each relevant UIG Interpretation listed in Table 1 below.  

Table 1: UIG Interpretations corresponding to IASB Interpretations
 
UIG Interpretation
Issue Date
 
Title
IFRIC or SIC
 
UIG Interpretation July 2004
1
Changes in Existing Decommissioning, Restoration and Similar Liabilities
IFRIC 1
 
UIG Interpretation March 2005
2
Members’ Shares in Co-operative Entities and Similar Instruments
IFRIC 2
 
UIG Interpretation March 2005
3
Emission Rights
IFRIC 3
 
UIG Interpretation June 2005
4
Determining whether an Arrangement contains a Lease
IFRIC 4
 
UIG Interpretation June 2005
5
Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 5
 
UIG Interpretation July 2004
107
Introduction of the Euro
SIC-7
 
UIG Interpretation July 2004
110
Government Assistance – No Specific Relation to Operating Activities
SIC-10  
 
UIG Interpretation December 2004
112
Consolidation – Special Purpose Entities
SIC-12
 
UIG Interpretation July 2004
113
Jointly Controlled Entities – Non-Monetary Contributions by Venturers
SIC-13  
 
UIG Interpretation July 2004
115
Operating Leases – Incentives
SIC-15
 
UIG Interpretation July 2004
121
Income Taxes – Recovery of Revalued Non-Depreciable Assets
SIC-21
 
UIG Interpretation July 2004
125
Income Taxes – Changes in the Tax Status of an Entity or its Shareholders
SIC-25
 
UIG Interpretation July 2004
127
Evaluating the Substance of Transactions Involving the Legal Form of a Lease
SIC-27
 
UIG Interpretation July 2004
129
Disclosure – Service Concession Arrangements
SIC-29
 
UIG Interpretation July 2004
131
Revenue – Barter Transactions Involving Advertising Services
SIC-31
 
UIG Interpretation July 2004
132
Intangible Assets – Web Site Costs
SIC-32

   
Other UIG Interpretations
11       An entity shall apply each relevant UIG Interpretation listed in Table 2 below.

Table 2: Other UIG Interpretations
 
UIG Interpretation Issue Date
 
Title
 
UIG Interpretation April 2005
1013
Consolidated Financial Reports in relation to
Pre-Date-of-Transition Stapling Arrangements
 
UIG Interpretation November 2004
1017
Developer and Customer Contributions for Connection to a Price-Regulated Network
 
UIG Interpretation September 2004
1019
The Superannuation Contributions Surcharge
 
UIG Interpretation September 2004
1030
Depreciation of Long-Lived Physical Assets: Condition-Based Depreciation and Related Methods
 
UIG Interpretation July 2004
1031
Accounting for the Goods and Services Tax (GST)
 
UIG Interpretation September 2004
1038
Contributions by Owners Made to Wholly-Owned Public Sector Entities
 
UIG Interpretation July 2004
1039
Substantive Enactment of Major Tax Bills in Australia
 
UIG Interpretation December 2004
1042
Subscriber Acquisition Costs in the Telecommunications Industry
 
UIG Interpretation November 2004
1047
Professional Indemnity Claims Liabilities in Medical Defence Organisations
 
UIG Interpretation June 2005
1052
Tax Consolidation Accounting
 
UIG Interpretation September 2004
1055
Accounting for Road Earthworks